Tools of the Trade: Moving Averages

It is unbelievable that many people in the market invest in a stock based on rumours or from friend's recommendation without understanding the underlying stocks technical.

Stocks may go up or down as it depends on the market sentiments and performance. As such how do you measure the strength of the underlying stocks. Overbought or Oversold or in neutral zone. It is mind-boggling to any person or a investor without understanding the tools that are used to measure the stocks. Thus i would like to introduce to you common tools used by a market trader to measure its performance.

One of the common tool used is : Moving Average (MA)

• It can be simple, weighted or exponential MA
• Changes in the price trend are identified by the price crossing its MA and not a reversal in direction of the MA
• Price finds support at MA in a rising trend while resistance at falling trend
• The longer the time span covered by an MA, the greater the significant of a crossover signal

Suggested Time Frame setting for MA

Short-Term                             Intermediate Term                            Long Term
10 days                                          30 days                                       200 day
15 days                                          50 days                                       225 days
20 days                                          65 days

DISCLAIMER The ideas expressed in this blog should not be used to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.